U.S. govt has no plans to stop adding emergency oil
(Adds oil shipments to rise to 125,000 bpd, senator comments)
By Tom Doggett
WASHINGTON, Feb 26 (Reuters) - Despite record crude oil prices above $100 a barrel, the U.S. Energy Department told Congress on Tuesday it had no plans to stop adding about 70,000 barrels per day of oil to America's emergency oil stockpile.
Katharine Fredriksen, who heads the department's Office of Policy and International Affairs, told the Senate Energy Committee that the Strategic Petroleum Reserve should reach a record 700.7 million barrels of oil by the end of March.
Many energy experts and U.S. lawmakers are against boosting the emergency oil stockpile at this time, saying taking oil off the market pushes crude prices higher.
Democrat Jeff Bingaman, who chairs the Senate energy panel, said the government should actually withdraw oil from the stockpile to put more supplies in the market.
"As we face the threat that Venezuela might suspend oil shipments to the United States, it is more appropriate in my view to consider releasing the SPR rather than filling it," he said.
However, Fredriksen said the amount of oil going into the reserve was less than one-tenth of 1 percent of the 85 million barrels of crude consumed daily around the globe.
"The modest fill rate does not put undue pressure on markets," she told lawmakers. "It's a minimal amount of oil."
"I think that's nuts, frankly," said Democrat Byron Dorgan of putting more oil in the reserve when prices are so high.
Frank Verrastro, energy expert with the Center for Strategic and International Studies in Washington, said the Bush administration's withdrawal of oil from a tight market encourages and emboldens traders and speculators to talk up oil prices without fear of reprisal.
He said the administration's insistence on continuing to fill the SPR "severely undermined" U.S. appeals for OPEC to ramp up oil output.
Legislation pending in the Senate, which was co-sponsored by Dorgan and Bingaman, would bar the department from adding oil to the reserve this year, unless the price of crude fell below $50 a barrel, a price level not expected any time soon by most energy experts. Dorgan later told reporters he would raise the bill's price threshold, possibly to $70 a barrel.
Fredriksen said the Energy Department will carry out the White House plan to buy $584 million worth of crude for the reserve this year to help replace 11 million barrels of oil sold to refiners in 2005 after hurricanes disrupted supplies.
Deliveries to the stockpile could rise to 125,000 barrels a day between May and September when oil purchases are added, according to the department.
"Before buying additional reserves, DOE will conduct a market assessment and make a determination whether it is a reasonable time to issue a solicitation," Fredriksen said.
The reserve was created by Congress in 1975 after the Arab oil embargo and now stores crude at four underground sites in Texas and Louisiana. Based on an oil price of $90 a barrel, the department says the SPR inventory is worth $62.8 billion.
As the Bush administration moves forward with filling the reserve, Frank Rusco with the Government Accountability Office said that to save money, the department should put more inexpensive, heavy crude in the stockpile which is more compatible with many U.S. refiners and store less lighter, sweet oil.
Fredriksen said more heavy crude will be included when the stockpile is expanded to 1 billion barrels, but sweet oil is preferred for the current storage levels.
"Heavy crude will take up more volume, leaving less reserves and less import protection," she said. The reserve has enough oil to meet about 56 days of total U.S. crude imports. (Reporting by Tom Doggett; editing by Matthew Lewis)
By Tom Doggett
WASHINGTON, Feb 26 (Reuters) - Despite record crude oil prices above $100 a barrel, the U.S. Energy Department told Congress on Tuesday it had no plans to stop adding about 70,000 barrels per day of oil to America's emergency oil stockpile.
Katharine Fredriksen, who heads the department's Office of Policy and International Affairs, told the Senate Energy Committee that the Strategic Petroleum Reserve should reach a record 700.7 million barrels of oil by the end of March.
Many energy experts and U.S. lawmakers are against boosting the emergency oil stockpile at this time, saying taking oil off the market pushes crude prices higher.
Democrat Jeff Bingaman, who chairs the Senate energy panel, said the government should actually withdraw oil from the stockpile to put more supplies in the market.
"As we face the threat that Venezuela might suspend oil shipments to the United States, it is more appropriate in my view to consider releasing the SPR rather than filling it," he said.
However, Fredriksen said the amount of oil going into the reserve was less than one-tenth of 1 percent of the 85 million barrels of crude consumed daily around the globe.
"The modest fill rate does not put undue pressure on markets," she told lawmakers. "It's a minimal amount of oil."
"I think that's nuts, frankly," said Democrat Byron Dorgan of putting more oil in the reserve when prices are so high.
Frank Verrastro, energy expert with the Center for Strategic and International Studies in Washington, said the Bush administration's withdrawal of oil from a tight market encourages and emboldens traders and speculators to talk up oil prices without fear of reprisal.
He said the administration's insistence on continuing to fill the SPR "severely undermined" U.S. appeals for OPEC to ramp up oil output.
Legislation pending in the Senate, which was co-sponsored by Dorgan and Bingaman, would bar the department from adding oil to the reserve this year, unless the price of crude fell below $50 a barrel, a price level not expected any time soon by most energy experts. Dorgan later told reporters he would raise the bill's price threshold, possibly to $70 a barrel.
Fredriksen said the Energy Department will carry out the White House plan to buy $584 million worth of crude for the reserve this year to help replace 11 million barrels of oil sold to refiners in 2005 after hurricanes disrupted supplies.
Deliveries to the stockpile could rise to 125,000 barrels a day between May and September when oil purchases are added, according to the department.
"Before buying additional reserves, DOE will conduct a market assessment and make a determination whether it is a reasonable time to issue a solicitation," Fredriksen said.
The reserve was created by Congress in 1975 after the Arab oil embargo and now stores crude at four underground sites in Texas and Louisiana. Based on an oil price of $90 a barrel, the department says the SPR inventory is worth $62.8 billion.
As the Bush administration moves forward with filling the reserve, Frank Rusco with the Government Accountability Office said that to save money, the department should put more inexpensive, heavy crude in the stockpile which is more compatible with many U.S. refiners and store less lighter, sweet oil.
Fredriksen said more heavy crude will be included when the stockpile is expanded to 1 billion barrels, but sweet oil is preferred for the current storage levels.
"Heavy crude will take up more volume, leaving less reserves and less import protection," she said. The reserve has enough oil to meet about 56 days of total U.S. crude imports. (Reporting by Tom Doggett; editing by Matthew Lewis)
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